Sommerfeld v. Adesta, LLC, No. 20-2046 (8th Cir. 2021)
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After New Adesta initiated an arbitration against the guarantors of certain indemnification obligations, three of the guarantors, brought an action in Nebraska state court seeking a declaration that New Adesta's arbitral claims were released and discharged in a settlement agreement. New Adesta removed to federal court and moved to compel arbitration and to dismiss guarantors' case. The district court granted New Adesta's motion in its entirety.
The Eighth Circuit concluded that the Settlement Agreement neither abrogated, modified, nor terminated the arbitration clauses set forth in the Purchase Agreement. In this case, the underlying issue, indemnification for the NYSTA work, is not a matter that was addressed in the Settlement Agreement, the Nebraska action, or the Illinois action. The court explained that, while the Federal Arbitration Act generally requires a federal district court to stay an action pending an arbitration, rather than to dismiss it, district courts may, in their discretion, dismiss an action rather than stay it where it is clear the entire controversy between the parties will be resolved by arbitration. In this case, the court concluded that the parties have a valid agreement to arbitrate the claims at issue, which fall within the scope of the arbitration clauses. Therefore, the court affirmed the judgment.
Court Description: [Erickson, Author, with Shepherd and Kobes, Circuit Judges] Civil case - Arbitration. The underlying issue in this case, indemnification for work on a particular project, was not addressed in a prior settlement agreement or state court litigation and the settlement agreement did not terminate the parties' purchase agreement or the purchase agreement's arbitration clauses; the district court did not err in dismissing the action in the order compelling arbitration, as the Federal Arbitration Act permits a court to dismiss an action rather than stay it when it is clear the entire controversy between the parties will be resolved by the arbitration.
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